Staggering Costs : AIDS Care: Who’ll Pick Up the Bill?
AIDS researchers at the National Institutes of Health last week trumpeted some of the best news yet in their eight-year struggle against the killer syndrome: evidence that the drug AZT can delay the development of full-blown AIDS in people with early symptoms of the disease.
Now come the hard economic realities. A full dose of AZT costs $8,000 a year, and federal officials estimate that up to 200,000 of this country’s 1.5 million infected people need it.
Other AIDS drugs have equally stratospheric prices: aerosolized pentamidine, including the cost of administration, can reach $3,000 a year. Analysts say high-tech drugs in the pipeline will fetch even more.
Issue of Economics
The costs of treatment now are beginning to catch up with medical advances. As scientists discover new ways to prolong the lives of people infected with the human immunodeficiency virus, the national struggle against AIDS increasingly becomes an issue of economics--and fiscal priorities.
“The questions grow more urgent with every biomedical advance,” said Dr. Philip Lee, director of the Institute for Health Policy Studies at UC San Francisco. “Who will pay? How much will it cost? Why does it have to cost so much?”
“The AIDS activist movement has made great strides in streamlining the federal drug approval process,” added Jean McGuire, executive director of the AIDS Action Council in Washington. “If we can extend those gains to reimbursement issues and drug pricing, we will have truly made a revolution.”
The estimated costs of a national program to medically monitor and treat those infected with HIV before they develop full-blown AIDS are staggering. The total annual bill could range from $2.5 billion to $10 billion, according to New York health economist Peter Arno in an article prepared for publication next month in the Journal of the American Medical Assn.
Budget Concerns
By comparison, Medicare’s kidney dialysis program for the nation’s 110,000 patients with end-stage renal disease is expected to cost taxpayers $2 billion this year, according to the Health Care Financing Administration. But budget-conscious legislators are in no mood to create another disease-specific entitlement program.
Neither Congress nor the Administration have included funding in next year’s budget for a large-scale program for early intervention against the virus. Coverage for drugs by private health-care plans is spotty, and some are dodging costs by instituting caps or exclusions on reimbursements for AIDS and HIV disease.
In February, for example, Commercial Sales and Service Trust of Los Angeles, whose policies provide a maximum lifetime benefit of $1 million, slapped a $10,000 cap on AIDS benefits, even for existing policyholders.
“One year of AZT or a few days in the hospital would eat that up very quickly,” said one frightened policyholder, a 37-year-old self-employed carpenter who tested positive for HIV three years ago and has been covered by the company for six years.
“As more and more insurance companies or employers start to redline, we will have created a class of people our society has never faced before: the employed uninsurables,” said Timothy Westmoreland, counsel to the House subcommittee on health and the environment.
Questions about who will pay for new medical technology predated acquired immunodeficiency syndrome and go far beyond it. In the 1970s, for example, private insurers and government health care programs were forced to decide whether, and under what circumstances, to pay for costly organ transplants.
‘Society Benefits’
By 1985, a survey of major health insurers found that 85% would reimburse for heart transplants but only 69% would pay for the costlier and riskier combined heart-lung transplant. Experts predict that the conflict between technological advancement and health-care cost containment will grow even more difficult to resolve in the future.
Advocates of spending for early intervention against HIV make both humanitarian and economic arguments. “Society benefits by keeping these people healthy, active, employed and paying taxes,” said Dr. David Rogers, elected last Thursday as deputy chairman of the new National Commission on AIDS.
“The alternative to early intervention is to do nothing and wait until we have a lot of sick, dying and demented people,” Rogers said. With total national health care spending of $550 billion annually, he added, “it is nonsense to say that we cannot afford it.”
“Early intervention dollars now will save an astronomical sum of money down the road in terms of future costs for hospitalization,” added Rep. Nancy Pelosi (D-San Francisco).
Still, the debate is pitting advocates of people with HIV disease against lobbyists seeking funds to combat cancer, heart disease and other illnesses. Some argue that AIDS research and education, budgeted at $1.31 billion for the current fiscal year, is already taking too large a slice of the federal health research pie.
Comparable federal research allocations in fiscal 1989 were $1.45 billion for cancer, $1.01 billion for heart disease, $267 million for diabetes and $127 million for Alzheimer’s disease.
Concern for Research Funds
Besides the current competition for research funds, “down the line, you can imagine a competition between the elderly and AIDS patients for health-care dollars,” said Anthony Pascal, a senior economist with the RAND Corp.
Within the National Institutes of Health, scientists fret that AIDS research dollars will be siphoned away to help pay for patient care. That is precisely what happened in March, when $7 million originally earmarked for research was diverted to a federal AZT program for people with AIDS. “It is a worrisome precedent,” said one researcher, noting that the AZT funds are slated to run out again in September.
Other participants in the emerging debate include the state and federal governments, private health insurers and pharmaceutical companies, who face serious pressures to roll back their prices of expensive AIDS drugs.
“It is clear that in order to pay for early intervention, we will need to piece together funding from a number of sources: Medicare, Medicaid, insurers and HMOs,” said Steve Morin, an aide to Rep. Pelosi. “Participants will also have to pay a portion of the cost.”
Morin said cost estimates of a large-scale early intervention program remain highly speculative. “We haven’t really tested the market yet. Demand is probably high in New York, San Francisco and Los Angeles, but early intervention is probably a foreign concept in much of the country,” he noted.
“How many people will come in (for testing and treatment)?” Morin asked. “What will their needs be? What funding sources are already available?”
Funding Issues to Fore
Government payments cover life-extending AIDS drugs in many states, including California through the Medi-Cal program. But such coverage requires that patients be impoverished to qualify.
Everywhere there is evidence that questions about funding are coming to the fore. Last month, for example, in its first foray outside of biomedical and behavioral research, the American Foundation for AIDS Research’s board of directors earmarked $500,000 for studies of health-care financing and service delivery.
“That’s where the AIDS story is going,” said David Corkery, the foundation’s director of communications.
In Washington, the Health Insurance Assn. of America has established a task force of insurance company medical directors to consider reimbursing patients for experimental drugs for AIDS and other life-threatening illnesses.
Most insurers currently do not reimburse patients for such drugs or for hospital stays associated with their use. In addition, some balk at paying for FDA-licensed drugs unless patients fit into precise criteria set forth by the agency or in medical literature.
Doctors and patient advocates argue that such restrictive reimbursement practices exact an inordinately heavy toll on people with AIDS and HIV because treatment advances are occurring more rapidly than can be reflected in the medical literature.
Caps Not Condoned
Jude Payne, policy analyst for the Health Insurance Assn., said private insurance companies are treating HIV and AIDS the same way they are treating other diseases.
“People have to be sensitive to the fact that New York and California are ahead of the rest of the country in defining standard medical practice for HIV,” she said. In setting reimbursement policies, she added, the insurers must look at the entire nation.
Payne said the association, which represents 350 private insurers, does not condone exclusions or caps on payments for AIDS or HIV.
Indeed, according to California Department of Insurance attorney Peter Groom, such caps and exclusions generally crop up only in self-insured health care plans. Such plans, under which employers typically bear the financial risk, are beyond the reach of state insurance regulators.
“These exclusions are cruel and heartless,” he said. “They dump people onto the public dole.” Some civil rights attorneys contend that the exclusions would be outlawed if, as expected, Congress enacts legislation supported by the White House barring discrimination against disabled people, including those infected with HIV.
However, the legislation would provide little relief against steadily rising insurance premiums. “I’ve seen situations where an employee with AIDS at a small company files his first claim and rates triple or quadruple for the rest of the company,” said Benjamin Schatz, director of the AIDS Civil Rights Project of National Gay Rights Advocates.
To hold costs--and premiums--down, some health-policy analysts believe Congress should consider ways to reduce prices of drugs for AIDS and other life-threatening conditions.
Orphan Drug Act
Specifically, they are urging changes in the Orphan Drug Act, which provides tax credits and a seven-year exclusive marketing license to companies that develop drugs for disorders affecting fewer than 200,000 people.
Lee of UC San Francisco points to the price of pentamidine, which jumped from $24 a vial to $99.45 when its use became clear in preventing pneumocystis pneumonia, the most frequent killer of AIDS patients.
“If you are going to treat HIV-positive individuals (instead of just people with AIDS), you’ve got a world market of 10 million people and a domestic market of 1 million,” Lee said.
As the uses for an orphan drug widen, “you’ve got to ask, ‘Can we lower the price with competition by re-examining the applicability of the Orphan Drug Act?’ ” Lee said.
To promote price competition, the Public Citizen Health Research Group and the American Public Health Assn. have petitioned the government to issue multiple licenses for AIDS drugs developed at public expense.
“Under the current system, the government is paying twice: the first time for the research and the second time for an outrageously priced drug through Medicare or Medicaid,” said Dr. Sidney M. Wolfe, director of the health research group.
But Dr. John C. Petricciani, vice president for medical and regulatory affairs of the Pharmaceutical Manufacturers Assn., warned that tinkering with the law could discourage drug makers from pursuing AIDS research. “Price controls,” he said, “could have a chilling effect on the industry’s willingness to take risks to develop new drugs.”
